How to Revive the Sick Telecom Golden Goose

Congratulations to Raghuram Rajan for setting the pace for India’s economic revival within his first week in office ! It’s clear that telecom and its delivery have a direct correlation with the GDP growth of any nation and that data will act as a multiplier. India’s future competitiveness is contingent on the development and growth of virtual infrastructure, as much as physical infrastructure. The telecom regulator too has now taken a comprehensive stance on the basic but vital ingredient for telecommunications: spectrum.

All those who understand telecom know that spectrum is a finite and scarce resource and must carry a price tag. This writer feels there should be no “free spectrum” and a notional value must be applied for even government organisations, including defence, to encourage optimal use of spectrum. But do we need to recover spectrum charges retrospectively and use the aberration of 3G auctions as a precedent for reserve price of spectrum?

We also understand that larger chunks of contiguous spectrum are more productive than smaller ones and the sort of fragmented spectrum we have in India contributes to national waste in terms of investment in less productive infrastructure. The process of vacating spectrum from other government users (defence, I&B, etc) is time-consuming and cumbersome. So, isn’t allowing intra-circle roaming across 2G and 3G logical? Additionally, we know that irrespective of technology, lower bands of spectrum , below 1000 MHz, carry more value due to the inherent physics that supports the technology. Is it prudent to take away even the small chunks of 800 and 900 MHz spectrum from users, knowing this will lead to colossal write-offs and consumers will be distressed by service disruption? Service providers certainly will find it stifling to either pay huge amounts to hold their 900 MHz spectrum or invest to migrate to 1800 MHz frequency completely.

Spectrum auctions have failed repeatedly in the recent past and about 286 MHz of unsold spectrum in 1800 MHz band alone is lying idle, which can fuel the data revolution. More productive 700, 800 and 900 MHz bands will augment the country’s virtual infrastructure when 700 MHz is brought to use and 800/900 MHz are made technology-neutral for higher efficiency in future . We will, however, need to preserve them in chunks of 5 MHz to utilise them for broadband technologies.

Trai’s steep cut in the 2G auction reserve price is not only closer to market value, as per international norms, but gives enough headroom for more participation and discovering the true price of spectrum. Our regulator clearly recognises that without spectrum trading, M&A will merely become an academic policy.

Where market price of spectrum has been already paid, the spectrum usage charge (SUC) should be reasonable to cover administrative costs essentially. By cleverly packaging a flat spectrum charge, Trai has essentially protected both the operators and exchequer. However, more importantly, it has cut through a contagious arbitrage issue of differential SUC for different technologies . Industry would appreciate if there is a sliding scale to bring the SUC charges to 1% over time.

While rollout obligations drive services deeper into rural India and are good for the economy, it is time for regulation to adopt a carrot-and-stick approach to rollouts. We must also incentivise operators who want to proactively roll out both for voice and data. Allocating 900 MHz in less than 5 MHz chunks is a waste of national resources and will jeopardise any future deployment of broadband technologies . Trai recommendations have taken cognisance of this as well.

Although Trai has not offered any suggestion on the pricing of 800 MHz band, used by CDMA operators, we should view all 700, 800 and 900 MHz as technology-neutral spectrum for a digital dividend. Remember, half of the 800 MHz spectrum used in India is used as E-GSM spectrum globally. Although there is no auction date announced , we hope it is sooner rather than later. We also hope the government will free up 15 MHz of 3G spectrum, presently held by defence, on a priority basis as 3G is a quintessential route to wireless broadband. The industry has just begun to gain semblance after a very tough period, and the recommendations may act as a booster if cleared by DoT and the Cabinet.

The author is former CEO (India), Airtel

DISCLAIMER : Views expressed above are the author's own.

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Author

Sanjay has been the CEO of Bharti Airtel, India & SA (Feb’10-May’13) and has been instrumental in shaping the growth & diversity of India’s largest integrated telecom service provider. Sanjay joined Bharti in 1998 and since then has held various senior leadership roles in the Bharti group. Not only has he lead Airtel India & SA business to unprecedented success across B2C & B2B portfolios, with customers in over 50 countries, but, also elevated himself as an industry spokesman. He extended his leadership well beyond the confines of Airtel to take up key positions of Chairman -COAI, Chairman of Telecom Committee CII and Executive Committee member of GSMA board.

Sanjay has an MBA from Cranfield School of Management UK and is a graduate of the Wharton Advanced Management Program with over 28 years’ experience, 15 of which are in the field of telecommunications, Sanjay is an inspirational leader with ingenious business acumen & instinctive collaborative style.

Sanjay has been the CEO of Bharti Airtel, India & SA (Feb’10-May’13) and has been instrumental in shaping th. . .